In the previous installment, we looked at the importance of location in terms of environmental matters, zoning, economic development of the area, and the identity of the landlord.
Today’s topic is build-outs.
Whether you are looking for retail, office or industrial space, no doubt the configuration of your space is vitally important to you. You might even have a vision of how it will look. Don’t leave to chance the look, feel and functionality of your space. The last thing you want is signing a lease and then finding out that you will not be able to build it out the way you want. Incorporate plans for your space as an exhibit to your lease. Be as specific as possible, down to the materials to be used. Depending on the complexity of the build-out, you may want to consider hiring an architect to design the space.
Once you have the plans for the build-out all worked out, determine who will perform the work, who will pay for it, and who will pull the necessary permits. In some cases, the tenant will be responsible for the cost, as well as pulling the permits and performing the work. If that is the case, the landlord may want to approve the contractors the tenants will use.
In other cases, the landlord will be willing to foot the bill for the build-out, and will want to control the work and the permits. In those cases, the landlord will most likely be looking for a higher rental rate and/or a longer term lease in order to recoup some of the expense.
In still other cases, the landlord might give the tenant a build-out allowance, which will cover some or all of the cost for the construction. The allowance might come in the form of a rent abatement for a number of months, or an agreement by the landlord to pay for all or a portion of the work done. Either party might be responsible for actually performing the work and pulling the permits.
In any event, the lease should be clear as to who is responsible for performing the work, who is responsible for paying for the work, and who is responsible for obtaining the appropriate permits. The lease should also clearly state the timeline for the performance of all the work. In some areas, permits can take quite a bit of time to secure, so check with your local permitting agency to see how much time will be necessary before work can begin on your project.
The moral of the story is that there is no hard and fast rule about build-outs. Negotiate with your landlord to find a solution that works for both of you.
In the next installment of this article, I will address some other factors critical to making your leasing decisions. In the meantime, feel free to email me at firstname.lastname@example.org or call me at 410-544-2931 for assistance with your leasing needs.